Accurate vendor management plays a major role in clean bookkeeping, smooth payments, and correct 1099 filing at year-end. The good news is that most vendor information can be found right on an invoice or a W9. Here’s how to set up vendors correctly from day one.
1. Create a Complete Vendor Profile
Start by entering all essential vendor details:
- Company Name
- Contact Name
- Display Name (if different from legal name)
- Mailing Address
- Phone Number
- Email Address
- Website (optional but often helpful)
Before adding a new vendor, always check for duplicates. Similar names (e.g., “ABC Construction” vs. “A.B.C. Construction LLC”) create problems later—especially during 1099 season.
Optional but helpful:
Attach key documents to the vendor record—such as service agreements, insurance certificates, or recent invoices—so everything is stored in one place.
2. Set the Correct Payment Terms
Payment terms should be set at the vendor level, not on a bill-by-bill basis. This ensures consistent due dates and accurate AP reporting.
Common terms include:
- Due on Receipt
- Net 15
- Net 30
- Custom contractual terms
You can also record the vendor’s preferred payment method (ACH, check, online portal). This helps reduce payment delays and confusion.
3. Assign a Default Expense Account
If a vendor is consistently used for the same type of expense (e.g., software subscriptions, office supplies, contract labor), assigning a default expense category speeds up categorization and prevents miscoding.
4. Enter W9 and 1099 Details
If a vendor will need a 1099, collect a completed W9 before issuing payments.
Once received:
- Enter the EIN or SSN exactly as provided
- Mark the vendor as “Track for 1099”
- Attach the W9 to their profile
- Verify their tax classification (C-Corp, S-Corp, LLC, Sole Proprietor) to apply the correct 1099 rules
Best practice:
Request a W9 from all vendors, even if they ultimately do not require a 1099.
If the vendor is not 1099-eligible, add a note like:
“Vendor is not required to receive a 1099.”
5. Review the Latest Invoice for Special Payment Instructions
Before finalizing the vendor profile, check the vendor’s most recent invoice. Important details may include:
- “Make check payable to ______”
- A different legal name vs. operating name
- Updated address
- Portal or online payment instructions
- Discount terms (e.g., “2% discount if paid within 10 days”)
If the “Payable To” name differs from the business name, edit the Check Payable To field accordingly.
6. Use Notes for Workflow or Special Requirements
The notes section is powerful and often overlooked. Include helpful details such as:
- Which portal they use (include link)
- Renewal dates for subscriptions
- Special billing cycles
- Preferred contact person
- Insurance expiration dates (especially for contractors)
These notes help streamline communication for your entire bookkeeping team.
7. Inactivate Vendors You No Longer Use
If you stop working with a vendor, mark them as inactive instead of deleting them.
This keeps reports accurate, preserves past transactions, and keeps your vendor list clean.
Final Thoughts
Thoughtful vendor setup is one of the quickest ways to prevent bookkeeping headaches. By entering complete details, attaching documents, verifying tax info, and using notes effectively, you set yourself up for accurate coding, clean AP reports, and easier 1099 processing.